Making Tax Digital for Income Tax (MTD) – what does it mean for me?

20th June 2025

MTD is HM Revenue & Customs’ new system for recording and reporting expenses if you are a sole trader or a landlord and is gradually being introduced from April 2026.

How do I know if I’m affected?

If you’re a sole trader or a landlord, you are likely to be affected at some stage. It all depends on your combined turnover (income before deducting expenses) from any sole trades and any property letting.

If your combined turnover from sole trade and property income is over £50,000 in 2024/25, you will need to comply with MTD from April 2026.  The threshold then falls to £30,000 in 2025/26 (applies from April 2027) and £20,000 in 2025/26 (applies from April 2028).

HM Revenue & Customs will obtain your turnover figures from previously submitted Tax Returns to decide whether you are required to comply.

What about partnerships?

HM Revenue & Customs have indicated that partnerships will be mandated in the future but have not yet provided a start date.

What will I have to do?

Taxpayers currently submit just one Tax Return on a single submission to HM Revenue & Customs to declare all their Income and Gains arising in the tax year.

Making tax digital will require four quarterly submissions to HM Revenue & Customs on a calendar quarter basis. Each Return will be due 1 month and 7 days after the end of the Return period. For example, if you need to comply from April 2026, your first Return will cover April – June 2026 and will need to be submitted by 7 August 2026.

The Returns will only need to include sole trade income and expenses and property income and expenses but are in effect a set of accounts each quarter.

You will need to use digital software to submit Returns. This could be full accounting software (such as Xero, QuickBooks or other), or a combination of a spreadsheet with bridging software that links to HMRC.

You will still need to submit a final declaration (similar to your current Tax Return) using commercial software, which will include all your sources of taxable income. Unfortunately, you will no longer be able to use HMRC’s free online service if you are in MTD.

What about paying my tax?

The current payment regime will continue without any immediate changes but could be subject to change in the future.

Why is this being introduced?

HM Revenue & Customs stated aim is that the new system will reduce the chance of errors being made and will assist with the government’s aim to reduce the ‘tax gap’ – the difference between what it expects the tax to be and what is collected.

What do I need to do next?

Consider when you will be required to comply with MTD (if at all).

If you suspect that you will be in the scope of the MTD rules from April 2026:

  • Think about what kind of software would suit you best, using full accounting software or using a spreadsheet together with bridging software are just a couple of different options.
  • From April 2026, your record keeping may need to be maintained on a more regular basis to that which you are familiar with.
  • Sign up for MTD through HM Revenue & Customs – even if you are already registered for self-assessment, you will still need to sign up separately for MTD before April 2026. We can assist you with the sign-up process.
  • If you would like further advice on this topic, please do not hesitate to contact one of our team.

What are Thompson Jenner doing?

HM Revenue and Customs are still in process of releasing guidance, and we are reviewing this and several software options to help minimise the burden of this additional reporting.

We will be happy to help with setting up systems, providing training, submitting quarterly and annual Returns to HMRC and so please get in touch if you wish to discuss any of these new requirements in more detail.

We are in the process of contacting clients that we know will be affected by these new rules, but please consider if any changes need to be notified to us.  We would encourage anyone that is affected to start discussing with us what they and we can do ahead of the April 2026 roll out.

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